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Home » News » Gold Prices are Climbing. What Experts Say About Investing Now

Gold Prices are Climbing. What Experts Say About Investing Now

by | Apr 18, 2024

two gold bars

In 2024, the value of gold has skyrocketed, marking a significant increase in gold futures by 14.49% since the beginning of the year. Reaching new heights, the price per ounce hit an all-time high recently, with a noteworthy climb since early March to its current value of $2,346.33 per ounce (as of April 15).

The upward trajectory of gold was evident in 2023, witnessing an 11-year high in gold investing as institutional investors turned to gold amidst persistent inflation and endeavors to control it through high-interest rates. So, what factors are driving this surge in gold prices? And is it a prudent time to invest in gold? Here’s what the experts have to say.

Understanding the Surge

Alex Ebkarian, COO and co-founder of Allegiance Gold, attributes gold’s price surge to a blend of economic and geopolitical factors such as escalating inflation, a declining dollar, and ongoing geopolitical tensions. He also highlights the increased activity of central banks, particularly led by BRICS Plus nations, in purchasing gold as a significant factor.

Michael Ashley Schulman, CFA and partner at Running Point Capital Advisors, suggests that the expectation of multiple interest rate cuts by the Federal Reserve in 2024 might have contributed to the rising gold prices. Lower interest rates tend to weaken the dollar, making gold relatively more valuable. Schulman emphasizes that gold’s upward trend and new highs are partly speculative, banking on the anticipation of Fed rate cuts and a weakening dollar.

Investing in Gold

Amidst the soaring prices, the question arises: should investors buy gold now? Joe Cavatoni, market strategist, North America, at the World Gold Council, foresees continued strength in gold due to various factors. Historical data indicates favorable performance of gold following Fed rate cuts, suggesting potential opportunities for investors.

Ebkarian underscores gold’s historical performance, noting its significant appreciation over the past two decades, making it a compelling long-term investment and portfolio diversifier.

Considerations for Gold Investors

While gold is often viewed as a safe haven, it’s important to acknowledge its volatility, especially in the short term. Unlike income-producing assets, gold relies solely on price appreciation for returns. Additionally, historical data shows that gold may underperform compared to the stock market over extended periods.

Attempting to time the market may prove futile, given the multitude of economic and geopolitical factors influencing gold prices. Hence, investing in gold for its intrinsic benefits beyond price appreciation is advisable.

The Verdict

Gold’s attributes as a hedge against inflation and a safe haven asset make it a valuable consideration for investors. However, experts advise allocating no more than 10% of one’s portfolio to gold and consulting a financial advisor to align investments with long-term financial goals.

Conclusion

In conclusion, the surge in gold prices in 2024 reflects a complex interplay of economic and geopolitical factors, with experts pointing to inflationary pressures and anticipated interest rate cuts as primary drivers. While gold presents opportunities for investors seeking a hedge against inflation and portfolio diversification, caution is warranted due to its inherent volatility. The consensus among experts suggests that while investing in gold can be prudent, it should be approached with careful consideration and guidance from financial advisors, with allocations limited to a small portion of one’s portfolio.

Recent news

Gruyere increases production in pursuit of gold

UAE Becomes the World’s Second-Largest Gold Hub Amid Rising Asian Demand

by | November 19, 2024 |

The United Arab Emirates (UAE) has overtaken London to secure its position as the world’s second-largest gold trading hub, driven by surging demand from Asia, according to a report by the Dubai Multi Commodities Centre (DMCC). The report highlights that Asian markets have reshaped the global gold industry this year, pushing prices to unprecedented highs before a slight pullback. Dubai and the UAE are strategically positioned as a vital link between Eastern and Western markets. The DMCC predicts an “Asian Century” for gold, envisioning an economic corridor among BRICS nations—Brazil, Russia, India, China, and South Africa—where the UAE plays a pivotal role. Ahmed Bin Sulayem, Executive Chairman and CEO of the DMCC, explained: "In recent years, we’ve observed a major transformation in the gold market. Western sanctions have fueled record gold purchases by central banks, leading many nations to reconsider their reliance on the US dollar. This has given rise to a new gold corridor across Asia, with Dubai at its core." The UAE’s gold trade has witnessed remarkable growth in 2024, with $129 billion worth of gold flowing through Dubai—a 36% increase compared to the previous year. This surge has positioned the UAE as the second-largest global gold trading hub, surpassing London. The DMCC’s report attributes this shift to geopolitical tensions and sanctions, particularly against Russia, which have disrupted traditional financial systems. Many countries are now diversifying their reserves by increasing gold purchases and repatriating bullion stored in the US. In some cases, gold is even being used as a substitute for the US dollar in international trade. As central banks continue to bolster their gold reserves, prices have surged, creating ripples across the global economy. The DMCC report underscores the need for key reforms to ensure sustainable growth in the gold market. Recommendations for the Future of Gold Trading To maintain this momentum, the DMCC suggests several initiatives: Enhancing Transparency and Regulation: Improving oversight in gold trading can ensure market stability and trust. Promoting Digital Innovation: Fintech companies are encouraged to develop digital tools, making gold trading accessible to small-scale and younger investors in emerging markets. Digitizing the Gold Market: The industry should work towards global standards for digital gold products and blockchain systems. These measures could increase transparency, reduce pricing inconsistencies, and minimize reliance on derivatives. As Dubai cements its role in the evolving gold market, the UAE’s rise underscores the shifting dynamics of global trade, with Asia at the forefront of this transformation.

Gruyere increases production in pursuit of gold

Gold Plummets Almost Three Percent After Trump Wins Election

by | November 7, 2024 |

Gold prices took a notable hit this week, sliding nearly three percent after the U.S. presidential election concluded with Donald Trump as the projected winner. Investors quickly moved capital into assets like the U.S. Dollar, stocks, and Bitcoin, reducing gold's appeal as a safe haven. As of Wednesday, the XAU/USD rate dropped to the $2,660s range, largely due to the strengthening dollar following Trump’s victory. With Trump securing 277 electoral votes to Vice President Kamala Harris’s 224, market sentiment suggests his economic policies could boost the U.S. dollar. Strength in the dollar typically pressures gold prices since gold is priced in dollars and tends to become more expensive for holders of other currencies. In addition to the dollar’s rise, capital is shifting from traditional safe-haven assets like gold toward riskier investments, including Bitcoin and equities. Trump’s assertions that he can negotiate peace in regions like the Middle East and Ukraine, though optimistic, may also contribute to the decreased demand for safe-haven assets.

Dollar and Stocks Rally While Gold Loses Favor

The markets seem to be responding positively to Trump's anticipated economic agenda, with the U.S. Dollar Index (DXY) climbing by more than 1.3%, reaching a peak of 105.32 on Wednesday. Stock futures also reacted with gains, with S&P 500 futures rising 2.2% to 5,909, and Dow 30 futures climbing over 1.3% to 42,770 in pre-market trading. The promise of potential tax cuts and economic growth has added to this market enthusiasm. Cryptocurrencies like Bitcoin have also surged, with Bitcoin reaching a record high of $75,407 amid expectations of a favorable regulatory environment under Trump’s administration.

Gold’s Price and Technical Levels Under Pressure

As capital flows toward stocks, the U.S. dollar, and Bitcoin, commodities such as gold, silver, oil, and copper are experiencing declines. Gold has broken through the key support level of $2,687, which previously served as resistance on September 26. A further drop could see gold testing its long-term trendline support around $2,605, though it remains within a broader upward trend on the long-term chart. For gold’s momentum to shift back up, it would need to reclaim its all-time high of $2,790, which could then pave the way toward the psychological resistance at $2,800, followed by $2,850. However, there are currently no technical signs of a reversal as gold continues its decline.

Long-Term Outlook for Gold

Despite the recent drop, gold’s long-term bullish outlook remains intact, and it may regain strength in the future if economic conditions shift. For now, though, the focus appears to be on assets expected to benefit directly from Trump’s economic policies.

Gruyere increases production in pursuit of gold

Gold Prices Surge to Record High, Cross $2,720 Amid Global Uncertainty

by | October 22, 2024 |

Gold prices saw a significant rise, reaching around $2,720 in the early hours of Monday's Asian trading session.  This surge in demand for gold, a well-known safe-haven asset, is driven by heightened global uncertainties, including concerns about the US election and escalating geopolitical tensions.  Ongoing conflicts in the Middle East and potential economic challenges in China have also contributed to the rise in gold prices. Investors are turning to gold as a reliable option amidst these crises.  Alexander Zumpfe, a metals trader at Heraeus Metals Germany, commented, “With the war between Israel and Hezbollah intensifying, investors are seeking refuge in gold. Additionally, uncertainty over the US presidential election and possible monetary easing from the Federal Reserve are pushing gold prices higher.”  Expectations of further interest rate cuts by the US Federal Reserve are also supporting the precious metal’s value. The Fed recently lowered interest rates for the first time in over four years, and there is growing anticipation for additional cuts. According to the CME FedWatch Tool, there is a 90% chance of another rate reduction in November. Lower rates often increase the appeal of non-yielding assets like gold.  However, economic concerns in China could limit gold’s upward momentum. China, the world's largest consumer of gold, experienced slower-than-expected growth in its economy during the third quarter of the year. The National Bureau of Statistics reported a GDP growth of 4.6% for Q3, slightly below their target of 5%. This slowdown could impact global demand for gold.  Despite these challenges, gold continues to attract attention as a safe investment option in these uncertain times.